Altered business model prompts name change to 'SCG Packaging'

“This is not merely a name change but an alteration in the way we do business,” he said.
Roongrote – tipped to succeed Kan Trakulhoon this year as chief executive of Siam Cement Group, one of Thailand’s largest industrial conglomerates – said SCG Packaging would offer not only products but an integrated range of services to serve the evolving needs of consumers, primarily in Southeast Asia.
SCG Packaging has targeted increasing revenue from its packaging chain to 80-90 per cent of its total revenue within five years, up from 72 per cent last year, while reducing the share of its fibrous chain.
The packaging chain is more profitable, offering a 17-per-cent EBITDA (earnings before interest, tax, depreciation and amortisation) margin versus 13 per cent for the fibrous chain, according to an SCG report for the first nine months of 2014.
Paper and packaging make up one of the core businesses of SCG.
Roongrote said that with total annual sales of US$2 billion (Bt67.5 billion), SCG Packaging was the largest producer of paper-based packaging in Asean but not yet the leader in total packaging solutions, which offered a wider range of packaging materials beyond paper such as flexible and rigid packaging made from plastics and other materials or a mixture of various ones.
SCG will go “step by step” when expanding to non-paper packaging. Accordingly, this year it acquired a 22-per-cent stake in Prepack, a 14,000-tonne-per-year flexible-packaging producer.
Roongrote said one-third of the Asean packaging market was paper packaging, while flexible packaging made from plastics was growing faster, and rigid packaging was growing at the fastest 6-7 per cent rate.
The Asean packaging market is estimated at 10 per cent of the global market valued at $800 billion. It has been growing by an average 5.2 per cent annually in Asean.
Roongrote said the growth of the market in Asean was expected to be higher in the future because of the increasing role of the region as an export base for many industries. He said SCG Packaging had maintained its commitment to serve its non-packaging-paper customers including printing and writing paper, although that market had been shrinking.
SCG Packaging has targeted an overall revenue increase of 5-10 per cent this year, with most of the growth expected to stem from the packaging business and driven by an expanded production capacity.
The local market, however, is expected to expand by only 1-2 per cent.
The company will focus on industrial packaging and food-graded packaging, with innovations holding the key to the SCG Packaging’s new business model target as the firm will increase its research and development budget from Bt240 million last year to Bt400 million this year.
It aims to increase the sales revenue from high-value added products to 47 per cent of its total revenue within five years, up from 39 per cent last year.
Roongrote said SCG Packaging’s biggest challenge would be adjusting its staff and corporate culture to cope with the rapid pace of change in the packaging market.